Supreme Court Decides in Favor of 340B Hospitals Regarding Medicare Reimbursement Methodology

On June 15, 2022, the U.S. Supreme Court unanimously ruled in favor of “340B” hospitals in a notable statutory interpretation case regarding how the federal Medicare program reimburses hospitals for pharmaceuticals. The case, which was introduced by the American Hospital Affiliation, arises from reimbursement reductions imposed by the Division of Well being and Human Providers (HHS) in 2018 and 2019 on hospitals taking part in the 340B program (which the Court famous are hospitals that “generally serve low-income or rural communities”). In these years, HHS sought to impose reductions in reimbursement attributable to favorable pricing out there to 340B hospitals beneath that program. The hospitals challenged these reductions based mostly on the method HHS adopted when setting the reimbursement charges, claiming that HHS’s failure to conduct a survey of hospitals’ common acquisition prices for the medication prevented HHS from various reimbursement charges for this distinct group. Due to this fact, in response to the hospitals, HHS was required to pay them based mostly on the typical gross sales worth charged by producers for the medication.

The Supreme Court agreed with the hospitals, holding that beneath the 2003 Medicare Act (at 42 U. S. C. §1395l(t)(14)(A)), “absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates for 340B hospitals” and subsequently the 2018 and 2019 charges set by HHS had been illegal. See Opinion at 14. The Court additional distinguished between HHS’s twin authority to set hospital outpatient prescription drug prices for Medicare sufferers and to ascertain various charges for teams of hospitals, indicating that “HHS’s power to increase or decrease the price is distinct from its power to set different rates for different groups of hospitals.” Opinion at 11. Accordingly, HHS can both depend on the typical worth charged by producers for all hospitals, or range charges by hospital teams solely after conducting a survey of hospitals’ acquisition prices for every outpatient drug. Due to this fact, HHS can not goal 340B hospitals for decrease reimbursement based mostly on the decrease acquisition price of outpatient pharmaceuticals bought at a reduction beneath the 340B program.

In its evaluation, the Supreme Court additionally thought of Congressional intent and the bounds on its authority to overview HHS’s rate-setting. Although HHS argued that Congress couldn’t have supposed for HHS to “overpay” 340B hospitals for pharmaceuticals, the Supreme Court indicated that quite the opposite, when enacting the 2003 Medicare Act, Congress was “well aware that 340B hospitals paid less for covered prescription drugs” beneath the 340B program, which was enacted in 1992. Opinion at 12. Second, the Court affirmed its authority to overview HHS’s actions right here, stating {that a} preclusion argument from HHS “lacks any textual basis” as a result of it “cannot override the text of the statute and the traditional presumption in favor of judicial review of administrative action.” Opinion at 8.

The Court doesn’t, nevertheless, tackle the events’ competing arguments associated to cures for the 2 years (2018 and 2019) in which HHS diminished reimbursement to 340B hospitals for lined outpatient medication. As a result of HHS is required to function this system for lined outpatient prescription drug reimbursement on a budget-neutral foundation, HHS argued that invalidation of its reimbursement charges in 2018 and 2019 would require budgetary offsets to different HHS applications, whereas hospitals argued to the Court that “various potential remedies could make 340B hospitals whole for the past shortfalls without running afoul of the budget-neutrality provision.” Opinion at 8.

As we now have mentioned previously, the 340B program has skilled quite a few challenges in current years. This Supreme Court resolution is optimistic for affected 340B hospitals, but it surely stays to be seen how HHS will react to handle the charges for 2018 and 2019, and to set drug reimbursement going ahead. In reality, HHS beforehand issued a discover for data assortment in help of a “Hospital Survey for Specified Covered Outpatient Drugs” in response to a decrease courtroom’s resolution that HHS had not collected the required knowledge to set fee charges based mostly on acquisition prices. DHHS, Company Data Assortment Actions: Submission for OMB Assessment; Remark Request, 85 Fed. Reg. 7306 (February 7, 2020). We are going to proceed to watch regulatory and judicial developments affecting 340B hospitals.

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